Mindful Money’s weekly shares watch: ITV, Sainsbury’s & Burberry

9th November 2015


Given England’s early Rugby World Cup exit, investors in ITV will be hoping to hear the knockout did not wallop advertising revenues when the broadcaster updates the market on Tuesday.

But the home of Downton Abbey and The X-Factor has enjoyed a firm 26% share price rise over the past year and ahead of this week’s report, the outlook remains bullish, with the general broker consensus listing the stock as a ‘buy’.

Graham Spooner, investment research analyst at The Share Centre also has the group on his ‘buy’ list. Looking ahead to this week’s third quarter trading note, he says: “The growing importance of the studios business has meant that the market does not just concentrate on the outlook for advertising rates.

“With Christmas looming there may be an update on the group’s plans for the festive period, which will be worth noting.”

The embattled supermarket sector is in the spotlight again this week, with Sainsbury’s reporting its half-year results on Wednesday. While the retailer’s shares have edged ahead by 5% over the past 12 months, over two years, they are down by a hefty 31% as stiffer competition in the industry has seen the main players lose market share to the likes of Lidl.

The group’s second quarter update saw management moderately upgrading current full year underlying pre-tax profit expectations, with both sales and cost savings proving ahead of its prior forecast.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers notes that as a result, analyst full year consensus estimate has risen from £548m to £573m, with a half year estimate of £269m – a fall of nearly 30% year-over-year.

He says: “Having flagged ‘an improvement in our key trading metrics’ at the second quarter update, management outlook comments will be closely scrutinised. Ahead of the update, and with the company’s differentiated offering set against falling profitability, analyst consensus opinion currently points towards a ‘hold’.”

Spooner, however, for his part has the supermarket down as a ‘buy’. He says “Given the fierceness of competition in the sector, Sainsbury’s continues to perform relatively well with market share standing around 16.1%. Further updates on cost savings and reduction in capital expenditure will be of interest, as will the pace of growth at its online operations.”

Burberry, down a steep 23% over the past six months, reports its half-year results on Thursday.

Previously announced first half sales disappointed, undermined by weak second quarter demand from Chinese consumers in particular. Bowman highlights that half-year adjusted pre-tax profit is forecast to fall by just under 8% to £140.3m.

He says: “On balance and with slowing sales weighed against ongoing investment and continued potential to further expand its outlet network, analyst consensus opinion currently points towards a ‘strong hold’.”

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